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tv   Market Makers  Bloomberg  November 14, 2014 10:00am-12:01pm EST

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thank you so much. "market makers" is up next. ♪ >> welcome to "market makers." eric and stephanie are at the bloomberg conference in washington. they have a lot of exclusive interviews coming up. we will join them in a few minutes. first of all, i will give you the top business stories of the morning. more accounting issues that hurhertz. -- at hertz. the company will investigate whether management had an influence over those mistakes.
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they say they will cut one of $2 million in costs. $100 million in costs. agree to documents, pimco says gross was paid $200 million bonus -- $290 million bonus in 2013. the bonus is more than 10 times as much as larry fink made as ceo of blackrock. president obama has a timetable for acting on immigration. the president spoke today before leaving myanmar. >> i indicated to speaker thater several months ago if in fact congress failed to act, i would use all the lawful authority that i possess to try to make the system work better. that is going to happen. it will happen before the end of the year. >> john boehner has already said he will fight the president's
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plan to the nail. president obama will keep about 5 million undocumented immigrants from being deported. many of them will get work permits. this story is 100% absolutely true. onionmpany that owns the is exploring a possible sale. founded as a newspaper at the university of wisconsin in 1988 and is now completely digital and has branched out into youtube channels. they own the av club. more for your thanks giving turkey than you did one year ago. turkey production is down more than 3%. the industry is still recovering from the record high cost of feed grain during a drought two years ago. some good news. themry stores often sell convince customers to buy other items like cranberry sauce.
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new threats of government shutdown. peter cook is in washington. >> you just heard the president say he is to move forward with his immigration exec of action. he did not list a timeline. but republicans are bracing for something as soon as next week. there is a split right now among republicans. conservatives led by ted cruz pushing for the gop to block or inund any executive action the spending bill. democrats and the white house would never accept that. that raises the prospect for a government shutdown. john weiner is warning the immigration trigger -- john boehner is warning obama to not pull the immigration trigger. >> this is exactly what the american people said they did not want. all the options are on the table.
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there are no decisions being made as to how we will fight this. >> privately, boehner has told house republicans he does not want to see a shutdown. mitch mcconnell said firmly there will be no shutdown. this is a test of the gop's leadership and an early stage. it gives you an indication of the gop split on some of these issues that could play out over the next two years. >> there is a different washington showdown going on. that involves the keystone pipeline. >> that's right. we had the political drama around this involving the louisiana senate race. the next that happens today around noon when the house of representatives will vote for the ninth time to approve the keystone pipeline project. bypassing the president and sending it back over to the senate. a much tighter vote in the senate. it needs it needs 62 pas you have democrats leading in
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republicans- house and their candidate representing them on the floor of the house. they are both fighting for credit over this vote. this willlear how play out. if it clears the senate, you have the president standing by. he gave the indication he will oppose any effort to shortcut the review process underway at the state corporate. political all be theater in congress more than anything else. >> that is not a surprise. peter cook joining us from d.c. speaking of keystone, it's been on hold for six years now. canadian crude producers have decided to find other ways to get their oil to u.s. refineries . matt phillips covers the industry for us. basically, it's not as important as it once was.
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>> the market has moved beyond keystone. six years ago when this was put on the table, it was going to be a major conduit. in that time, the industry has basically moved beyond it and said there are other ways for us to get heavy oil from the western part of canada into the u.s. in the past four years, the amount of canadian crude is up 80%. some of it goes into chicago. the opening get is of a pipeline that goes into chicago. the market has moved beyond keystone. whether or not this thing makes its way to the president's desk or he decides to approve it, the market has gone beyond. >> as peter points out, there is a lot of political theater involved now. why does mary landrieu get behind this?
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do u.s. companies need this to happen? who does it benefit? u.s. refineries on the gulf coast to spend billions of dollars over the past 10 years making upgrades on to their refiners to be able to process the heavy stuff. this is before the shell blew unlocked $9 billion of oil a day . they want to recoup that investment and they definitely want to stop. -- want this stuff. we have seen trains come online. that is increasing. this is your refining base and the gulf coast that is desperate to have this heavy stuff. impactenvironmental would be less through a pipeline that it would be through trains and shipping both around the coast. >> that's why we invented
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pipelines. it's easier to go a-b. when you look at what has happened with the train boom over the last 3-4 years and the explosions and derailments, that is clearly a lot less efficient and more dangerous because it's going to people's backyards and cities and towns. they never really thought -- this is corn and soybeans a few years ago. now, it's crude oil. >> if you ship it out to the coast and then ship it down with oil tankers, they have had accidents in the past as well. one of the things that i think raises a question for me and for americans who are concerned about illegitimate use of eminent domain, is this for public good? if they go and take some farmers here's what we will give you for it because we have eminent domain, isn't that
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supposed to be used for public good and not for corporate profit? >> what is the public benefit of a keystone? yes, it would reduce our gasoline prices and lower the cost of oil. now, we are swimming in crude. it's hard to argue that the --ted states would benefit the average person on the street would benefit from the keystone approved anding going through a sensitive area of nebraska that sits on top of this aquifer. >> thank you so much for joining us. i can't believe it such a fascinating story so many years after the debate started. i want to bring in eric and stephanie from washington, d.c. what have you got for us today? >> a huge, huge day. over the course of the next few hours, we are going to be hearing from the macy's ceo, the
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founder of tpg -- >> bob pittman of i heart media. coming up after this commercial break, it will be the former director of the nsa, general keith outs and are sitting down with me and stephanie to talk about security threats in 2015 and beyond. stay with us. ♪
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>> welcome back. you are watching "market makers ." stephanie and i are here in washington, d.c. outside. it is cold out here. it's hot inside. we have some of the leading minds across industries talking .bout the year ahead the biggest risks, challenges, goals as they head into a figurehead. a one-day course on the future.
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that is what bloomberg is holding with the your head conference. we have pulled together the brightest minds and top leaders across corporations, policymakers, former and current. one of them happens to be sitting with us right here. the former director of the nsa. keith alexander. welcome. >> thank you. ofwhy don't we make sense the purpose of this conference? talk about the kinds of threats you see on the horizon. industry, government and individuals are going to be facing in 2015. >> my expertise lies in cyber. the communications domain. if you look at how technology is doubling every two years and the amount of the technology humming and and you see how the ramp up in exploits internetworks are mark even015 will
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greater exploits of personal information,l credit cards, other things and disruption and destruction. >> when companies are saying they are doing a lot to protect themselves, have they scratched the surface? >> the issue is not -- they are doing a great job. we have to change the paradigm about how we secure our networks. we have people doing tasks and thinks people are not good at. passwords are really difficult. to,the things you now go all the different sites creating a new password for every one of those is very difficult. why do we have people do this? why don't we come up with a new way that is more secure? we have to get the machines to help us secure the network. we have to come up with ways of detecting malware that is not based on signatures.
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-- when have new ones you have new attacks, you see , the systems we had in the past of work. you have to come up with a way of the typing. just detecting. we have to change this paradigm. ampanies like jpmorgan do great job of protecting their networks. the tech community has to come together to solve that problem. >> you say exploits, what do you have in mind? what are criminals going to do? >> what they have been doing is and stealto a company your personally identifiable information so they can sell it on the black market to somebody else who will take that information and create credit cards and other information to go get money. they do that.
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>> that's the kind of crime that goes on for financial opportunity. what about the more insidious kinds of attacks that we are beginning to see develop where criminals or agents of another enterprise try to take down a network altogether? to ast is what i refer what we will see in 2015. nationstates and near nation state actors that can't attack r homeland any other way can attack us in cyberspace. we have disrupted the tax. -- we have disrupted attacks. we are seeing those. our internet service providers -- financial institutions
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that's what we have to be prepared for. you need into why cyber legislation and why government and industry have to work together. >> is there any legislation that has been held up in congress that we will move quicker? >> the cyber legislation has been held up for a series of reasons. partly because of the nsa leaks and what is going on with all that. i think it will pass next year. in this case, this is one where you can help get the facts on the table. what we do and what the government does to protect civil liberties and privacy and what industry does. how do we do this so the american people are comfortable with the approach? >> do you want to share all the information knowing there are hackers out there paying attention to every move? the processto share
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of how you are going to do it. not the tactics of what you are going to do. metadata say sharing or data about information to help stop attacks, sharing that at network speed is going to be very important. if one of our critical industries is attacked, the government may not see it. the industry has to be able to tell the government at network speed, i have a problem. that type of information should be shared at network speed broadly across the department of home insecurity, the fbi, nsa and cyber command. >> the collection of metadata still alarms are a lot of people. what are the kinds of threats you have seen from inside the nsa? can you still be a civil libertarian? >> absolutely. it is not an either or. datau are going to use the
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, what are the safeties we have around it to protect our civil liberties and privacy? that has never been fully explained. we did a terrible job of explained that. that needs to be explained on the cyber security side. put it out there and let people understand. some type oft for attack to occur and then say we should have done this. we already know. you brought it up. we saw it in 2012. is there a certain industry you think is most horrible? vulnerable -- most honorable? >> lectured power, the government, financial sector. -- electric power. they pay us to be paranoid. >> it is justified. >> we are delighted to have you
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here. thank you so very much. >> good to see you. >> general keith alexander, former director of the nsa. we will be back in a couple of minutes on "market makers." macy's and ceo of the cofounder of pbg. ♪
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>> all those guest coming on, plus the ceo of virgin america. we get closer, little change. the index is still hovering near all-time highs. the s&p 500 unchanged there. at 17,653.es retail sales came in better-than-expected. people are worried about valuations getting ahead of themselves. those arrows balancing each other out.
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i mentioned that virgin america started trading its ipo today. the company raised almost $307 million. u.s. airline ipo in three years. shares are up almost 26% since they started trading this morning. we will talk to the ceo of virgin america. stay with us for that. hertz, looking at those shares. lower after the rental car agency saying it will revise financial statements from 2011-2013 and continue to review $87 million of errors so far. this is not a huge surprise. the company is also saying it will look into top executive behavior and see if the tone they set was responsible or contributing to this. these huge accounting errors. coming up, bill gross's big
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payday. imagine what it would have been like if you had a great year. this guy cashed in. retail has been make or break. the ceo of the biggest apartment store chain in the u.s. ♪ . .
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>> welcome back to "market makers." e i am matt miller. stephanie are at a conference. we have a big scoop. pimco had a pretty lousy year with bill gross at the head. they trailed 55% of their peers. but documents obtained by bloomberg show that gross still received a $60,000 bonus.
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big, big story. big numbers. big huge numbers that are really surprising. i thought g would have the thought grasso i would have the biggest bonus. >> people are saying those are really insane numbers, but would it in context area gross built a firm that ended up managing $2 trillion. there is really nothing comparable. >> clearly he did that, but the fund did not do well and if you are investor enough on, you have got to feel like, why is the guy running this fun getting $300 million? >> exactly. the total return did not knock it out of the park last year. it was really a tough year. wherere looking at a year they did not get paid.
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why does bill gross get a? granted, he is the founder. 1971, build it into the massive things they have today. that does not mean you get to just sit back. you have to deliver. >> he has had a phenomenal track record for most of the total return's pond industry. the last three years was bad -- the end of qe, inflation rates rising. it turns out he was wrong. eventually he reversed himself, but the damage in terms of performance numbers was gone. >> you mentioned it is a billion and half dollars. it is not just bill gross's bonus. mohamed el-erian. what? $230 million? >> it was a great year for a lot of people. resigned -- and they
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resigned from the firm. >> this essentially makes windy cups one of the highest-paid, if not the highest paid, women in finance. her father built the firm. >> it is really impressive. >> she single-handedly raised few millioniling a dollars. >> the question i have is, why is pimco paying these people so much? not earned itas -- if you can earn a $50 million bonus, you know. but a retention bonus. you are supposed to hold workers. i just saw the other day pimco wants to pay workers even more to stay there. >> that is not the managing directors. that is the rank-and-file. 231 employees there.
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it was the retention bonus to keep the rank and file people. as much as i credit will gross for building, it is not one man. it is a team effort. build theed to powerhouse. theret is important -- was a lot of fear within the firm saying, hey, we have a shrinking asset base. if you are paid a stop the growth of the economy, that is really scary. they were looking at saying, ok, my job is kind of done. >> what is pimco's response to the story? >> they told as our numbers are inaccurate. we said, why? responsible journalism -- only me what is wrong. nada. got not a -- got
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>> whenever there has been a story about pimco's earnings, the the response has been no comment. this is the first time they said,, oh, you're numbers are wrong. we can't tell you why. we cannot say they are precise to the penny, but they are pretty accurate. >> if you were off a few dollars -- think of that is a perfectly fine disparity, i am ok saying -- >> i interpret that as a little bit of a wink. "oh, you are wrong." have confirmed the data more or less in my mind. " you are obviously talking with the bull -- you are obviously talking with people, not bill gross level. finance. at salon of what are they saying? >> people outside of finance are
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astonished at the numbers. you had to be the best-performing athletes in the five most popular sports all in the same year to earn what gross are earned. people are just astonished by the numbers generally. folks whoa group of say, hey, this guy built a $2 trillion firm. he can pay himself whatever he wants. other people have suggested, this is now starting to veer into the -- >> socially responsible? makes a significant, if this was a private equity fund, days ofng back to the drexel, they were a private partnership. no one cares as much. alioto's, a publicly traded company, this is never been disclosed in any documents to shareholders. that is number one. number two, the big issue is the pimco rhenium. companies like vanguard or
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blackrock, they pay much more -- they charge much more for their holdings. there is a little bit of pressure -- hey, why aren't you as cheap as an art or blackrock? , it is a have to ask fun story on a personal level that someone makes that much money. have you gone to the other matt miller, whothew g. was in charge of bloomberg's billionaires? >> yes. he helped me. he loves the story. this data is hard to get. so, the past couple of years, you do not want to do it irresponsibly. you have a low estimate. i do not want to over do it. what we have to do was revisit that. >> bill gross has a lot more. a few years like this, and it has to be more than that.
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great story. we will take a quick break, but you can check out their story on bloomberg.com. i am sure they are both tweeting. look for them there. remember when the tablet was the next best thing? we will see with the future holds for mobile devices. stay ♪ with us on bloomberg tv. ♪
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>> knows what the future ultimate comes to technology. back in the 1990's, people had to be dissuaded a cell phone might he useful. now millions of smartphones are used across the globe every day big what might be the next thing in this space. we will take you back to stephanie and erik. matt.nk you so much, we are talking about what will be the future of technology.
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you recently said mobile is going to eat the world. what did you mean by that? >> we have gone from a billion to 4 billion's smartphones. again have aults smartphone. not all of them use them all the time and not all of them will be online all the time. be selling to the majority of the u.s. population for the first time. that changes how the internet works. it changes how the tech industry works. it changes the opportunity to change the global economy. you have to bring people more in line. >> the internet changed the assets. already, more than half of the internet traffic is from mobile apps.
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the internet is already being changed. after 20 years where you have a web rouser and a mouse and a keyboard and he went to google verizon has been broken apart. >> does that mean the search engine goes away? >> it does not go away. it becomes different. lot more impunity for other people. at the same time, based -- facebook. you see instagram and whatsapp and all of these other things. at mobile becomes more interesting. were not trulyes into mobile, are those as good as dead? it depends how long you have got and how you think about this stuff. virtually everything has become an internet company. the internetugh was something that you bolted
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onto the side of your business. about now it is bolted onto the side of your head. instead of it being upstairs -- any point in time you can pull your phone out and have functional access to the internet, whether you are in a store or a bar. nobody makes plans anymore. >> which platforms are going to matter. is still going to matter. android is going to matter. are there other contenders? >> nothing is really settled yet. the top endcked up of the market and google is taking the rest, but everything is being thrown around. what will present some? how much role will google app within android? then you have facebook i'm to build a platform on top of the two of them. they are trying to find ways to
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with allpps and social sorts of other experiences. you have all of this on top of those two basic forms are it nothing is settled yet. advertising dollars going to migrate to mobile? mobile at this moment is in a funny transitional period where it does not yet deliver these same experience you get on other platforms. over time, definitely. do you see any one thing that will be as much of a game changer for mobile as the iphone was? >> i do not think we will be using flat glass rectangles in five or 10 years. >> what? words?tphones, in other use majority of smartphone
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is at home. oculus is impressing. [indiscernible] and also, we have watches and other -- why has wearable had so much trouble getting off the runway? >> excuse me. you wear one. >> i do not use it a lot. very little. so i think there are two got answers. taken until very recently to get to the point where you have the battery life in the component that are viable. that is critical in the supply chain. i think the broader point is we are still searching for what exactly you would use it for. what does this device do? why do have this as well as a smartphone? >> is it fun to use? >> i think that this is why -- they haveing
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kind of nail that with the apple watch. these are challenges with growing tech. what apple has done with every generation of products, they have taken a tech product -- the original mac fundamentally changed the way that you approached it. the same thing with the iphone. the same thing with the ipad. say, is it fun, what would you use it for? i think about yahoo! and aol merging. what do you think? are twoi think those companies with huge opportunities and challenges. there's a lot of rate business, a lot of audience. they do not necessarily fit into -- that does not mean that there are not good opportunities there.
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>> would they be good together? >> [laughter] will end on that. benedict, thank you so, so much for joining us. benedict evans. >> and coming up, we have bob pittman. we will be back with more in just a few. thanks for joining us. ♪
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>> welcome back to "market makers." in d.c. for the conference. we are with the chairman of ihea rtradio, bob pittman. this is the year of taylor swift. her music off
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spotify. what do you make of this? >> she is one of the smartest people i've ever met. i think what she is bringing up is the downside -- you are taking the value of the song 29 to a penny or so and she's saying, that is not worth it for me and she thinks those kinds of services where you are renting all of the music in the world for one price causes consumers to stop thinking about this because it is for free. it is just "my music." >> and one artist completely turn off your music? >> there is always a moment in time in which someone says, when things are not working, spotify is not aking a profit -- it is wonderful thing for the consumer, but there has to be economics below it. if you met -- if you remember in
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the 1990's, there were free isp' s. the consumers love it. the economics did not support it. they changed the business model or when out of business or whatever. i think what taylor has done is they, look, i want to be paid for being an artist. >> that is because she can. we know that taylor swift export taylor swift. does you speak for everyone? artists,art is, -- spotify is good, right? >> i cannot do that. it is on-demand services. not streaming. $10 a month. you have every known artist you might ever listen to or $10 a month to write 10 songs. what it does is, the $10 is spread so thin it is not a lot of money to anybody and i think that is the complaint.
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if you ask me spotify people, they will say, give us time we will build it so big -- $20.e price may go to somehow i think the bigger issue is, there are debates in the it.stry, both sides of are you training people to think that most of that music is free? >> what is the answer? >> i do not have a dog in that hot. i think the numbers from taylor are absolutely true. she is a major artist. -- i think this is something the industry is grappling with. everyone wants to do the right thing and motives for everyone are really good. there are conflicting views of what the future is. i think awesome things change
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when one person does one thing. this is what taylor did. another huge entry are as did the same thing. everyone is watching saying, is this the moment? does the relationship change? does the service change? one artist says, do not give it away for free. those debates are going on, seo. >> why not having more dynamic model?model -- pricing whereby taylor swift or whoever could say just like cable negotiates with content producers, right? muche prepared to pay this for that. says, take producer a hike. taylor swift could say the same thing to spotify. >> it may be that. you had that with itunes.
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the problem with spotify, is a cannibalized too much? wait are saying, whoa, minute. i think we had some really interesting debates about it. we have a lot of can tumor data we are looking at. and we share with people, get a lotviously we of radio stations play. on the radio stations, there are that retail the music and some that promote the music. we are on the remote side. -- we are on the remote side. we can tell you that taylor swift the top of the rooftop in new york city, dancing to all her music with the empire state building folks. when you have something like that, we understand how you promote. we live with these artists'
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careers. they want to make money and have successful careers so they can theory around a long time and make lots of great music. that is good for us all. ♪
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x welcome back. i'm matt miller. eric and stephanie are in washington, d.c. and will be going back to them shortly. businesse global stories of the morning. we look it off with retail. americans spent more than expected last month. retail sales group 3/10 of 1% after a drop in september. consumer confidence is being boosted by lower gasoline prices, obviously, but also by higher values for stock and for
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homes. and more accounting issues at hertz. the rental company will have to redo financial statements for the past three years. and it will continue a probe that has already uncovered it hundred and $70 million in errors. looking -- $870 million in errors. a director said they are looking into mistakes. a surprise proposal for the commissioner of the national basketball association. adam silver says bedding should be allowed on pro sports. he writes in the "new york times" that there is an obvious safe and legal way to bet on games and called on congress to permit a framework that would allow gambling. grauer, let's listen in. have organize ourselves to college this, but not anybody
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does. we're the eighth largest internet company in america today after netflix. businessg part of our is just e-commerce alone. but when you mix it in with how many times a consumer touches text not -- technology, it's a huge percentage. click and the outlook for 2015 as it relates -- >> and the outlook for 2015 as a relates to investment? >> as we get older, whatever we were, we kind of get more so. that will be the same for the younger generation. they will become more dependent on technology to learn about what the next step might be. be even more the same. our stores are now outfitted with bringing the online experience inside our stores. this was in our bloomingdale's store in palo alto. you go into a fitting room there and you've got a tablet device on the wall in the fitting room,
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so the customer can communicate with the people on the floor -- bring a size six instead of the size for i have in the stress. bring me a handbag that my go with this. and we will be shooting options for what my go with that particular dress while she is getting dressed. -- that might go with that particular dress while she's getting dressed. there is a much more getting into the end-user experience as opposed to the online or mobile experience. cannot with quarterly results, very strong. earnings were up 20%. the challenge continues to be in store growth. about that,hink particularly in the context of this diverse operation you have now? matters to a $30 billion company. when the economy is clicking along and it is gdp of 3% to 4%,
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will clearly benefit from that. when it is not, and when the spending is an health care or on products that we do not sell, which is technology, it doesn't really help us. we just have to say, you know, that's our problem. we have to continually change .he mix and where we are doing at -- that, it has been good been a pretty broad-based flat sales for the last several months in the retail industry. some of my stores and some of my categories are doing great, while others are offsetting and turning out to be a relatively flat quarter this past quarter. -- and i expressed that in our press release -- reasons why the fourth quarter ought to be better for us. that is the reason our stock went up again. we announced the third-quarter earnings and sales.
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about three weeks ago, terri -- >> about three weeks ago, terry and i were playing golf together, one of our favorite recreational pastimes. walking down the fairway of this golf course and i turned to him and began my pitch on the 30% club. it is an initiative that started in london to basically get to not executive directors in ftse 100 companies was up and i said to terry, diversity is important to all of us. would you be -- consider being in this initiative, which i started in the united states? and he turned and looked at me and said, count me in. spend the money it -- spend a minute, if you would, because you really set the bar in diversity and inclusion in the leadership and throughout the ranks of macy's. i think it's a terrific example for this group. one of our speakers last night talked about gender diversity
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being the optimistic thrust for 2015. if you could give us some thoughts and insight on that, that would be great. >> if you don't start with the mindset of wanting to be willetely inclusive, you just not be fishing in the approval of all opportunities. you are missing too much of the talent, potential employees, potential customers. byyou are limiting yourself not being completely inclusive. you have to start with that mindset, and we do. and secondly, you just have to have a focus on it. you cannot just let it take its own path. that "i to be decisive want more women on my executive committee." i want more diversity in my leadership. you have to build the fences and create the opportunity to make sure that happens, and then watch it and support it and drive it. and we do that in our company
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and we've seen results. a 30% club was easy for me to join, since 50% of my board members are women. it's not a problem. i will challenge you soon to be the 50% club. [laughter] how do you do it? would you give us some statistics in your senior leadership what the mix is? and how do you lead from the top on this issue and really reinforce it to your senior leadership team so that it permeates through the organization? crack 55% of the top 100 people in my company are women -- >> 55% of the top 100 people in my company are women. we start with that. there is a history in my company particularly, but also the retail industry, that there are career opportunities here and there is no ceiling. there is nothing that can stop you. there are female ceos in our industry as well. women see that as a place where they can have no barriers in terms of their futures.
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and again at macy's and bloomingdale's, we strongly encourage and provide those opportunities. when you look up and -- when they look up and see someone who looks like them, they say, i can get there too. that is the answer and that is what you have to do to provide. that is a we do for our minority population as well as our women population. and at my director level, i have representations from african american, hispanic, information, as well as the women peace. that is important for our employees to look up to as well can have the ultimate job of been a director of a company like ours. jeff of linkedin talked about one of his basic philosophies, which is reflection. i think josh to wrangle says he daycates up to two hours a to think about things and get out of the mainstream of the 7:00 a.m. to 9:00 at night back
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to back meetings. do as part of your leadership style in the context? >> it is hard to find two hours am i can tell you that. there is no shortage of work. >> i have seen you on your smart phone. x yes, yes. there is no shortage of work. for me, to have a lot of the talent around me to have access to me. things i do that i spend a great deal of time on is spent time with the young people of the organization. every week, i spent at least -- this is a challenge to everybody in my organization, but also the 30ail industry, to spend minutes week with the young person in your organization. i knock that out pretty easily because i have what is called the breakfast club. the breakfast club is people who have been in my comedy for three to five years, and they are usually in their 20's, maybe 28 or 29. i get 14 of them around the and ion a frequent basis
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talked to them for 15 minutes about what is going on in the company, and then they fire away and asked the questions. this millennial group is not sure i. they were lastly absolutely any of -- anything. the real objective is to make sure they all know i'm a because i got some of you from blooming day is, some, someone from macy's.com, bloomingdale's.com, logistics, the planners, the mergers. i try to show all of the career options among them, and the possibilities. i get them to know one another, so they can create a network. 176,000 employees who try to act like a company that is run like a small, family-run business. i'm learning so much more than i think i'm giving in those conversations. just trying to stay connected with what's on their minds. and sadly, you can learn all you need to know all -- all you need to know about technology just
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getting to know how they shop, what are they looking for, and it's very helpful. these experiences were you can inspire the troops and they will remember it for a long time. >> and they do talk about it. the word gets around that i'm accessible. >> the theme of this conference is the year ahead, 2015. from macy's perspective and in your role as a very senior leader in the business committee in the united states, what are you thinking about for 2015? what are the challenges? and any other insights you might share with us. >> you know, i spend plenty of time in washington and i work with different groups in trying to further business opportunities for lots of businesses here. our particularly focused on own industry. i spend time with the national retail federation and try to
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work on their agenda for all retailers. yesterday, i was with a group of them and we were talking about a big strike potential on the west coast right now. you know great christmas, it's a holiday time. we need the inventory to get through the system. this is the wrong time to slow down work stoppage around these stocks. i had to -- as well as matt shea who is here, had to notify the president. get them at the table. and then i didn't feel like it was going to be enough, so i called the ceo of walmart, who is a friend, and said, i need your help. he called valerie and got back. we will do things like this and work together, because we all have the same objective generally speaking. we want all boats to rise. and when our business is doing well, the retail business, it's good for the economy. not anybody's radar screen, things like this. it will take $1.9 billion of gdp
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out of america per day if we have a slowdown. this is just one example of the things that pop up all the time that we as business leaders have to get involved with an race to the surface and make some connections, so we can keep things moving in the right direction. of -- alln the effort in the effort of making this a bit of performing economy. >> you have been watching bloomberg chairman peter grauer's exclusive interview with terry lundgren, the ceo and chairman of macy's. we have been watching what has been -- what is coming up not only for the future of technology, but business. friendly fork virgin america. the airline just went public. they raise $300 million. and the stock is up today. we talk to the ceo of that company. plus, retail of -- from a different angle.
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he will talk to the ceo of the home shopping network. mindy grossman. stay with us on "market makers ar." ♪
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>> virgin america is taking flight today as a public company, flying pretty high so far. shares surging from the $23 ipo price up to -- and up almost 30% now. joining me is the ceo, david cush. david, thank you for joining us this morning. that's a big pop. 30% is definitely good for investors. it also leaves a little money on the table. i think we were comfortable with that. wered -- >> i think we confident with that. we had a discussion last night with our core investors and i think we wanted to ensure that investors were coming along their side and feel good about the company. i think they were feeling good with the pricing selected get a pop. -- so that it did get a pop.
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but what about virgin america >> what about virgin america draws investors echoed with the relatively small line, but what do you think will lead to sustainable profit -- profit growth? >> i think we are focused on the great products and revenue performance, but it's really about the low-cost model, the simplicity in our operations command the fact that we are actually a pure version of the low-cost model. others have got away with it, but we are a point-to-point character -- carrier and we're able to do that with a rising premium to the industry. >> i think people see virgin as a more luxurious option. how'd you foster that image? -- how do you foster that image? >> we have very comfortable seats, and that is important on a long-haul carrier. and we have very pleasant and friendly teammates. when people get on our click -- our airplane, they feel
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different vibe, a positive and family vibe, and they keep coming back. >> and they go a lot of places ith virgin america? how big is your reach, and do you expect to grow that? take a look at the map, and we can see the places that you fly, not bad. but you could fly more places. >> we will stick to where our model works. to will not be all things all people. we are primarily focused on business travelers and business markets, and the big markets first of that is why uc san francisco and los angeles, the fact that we file a transcontinental markets, things like that. we want to stay small and we want to stay intimate as a company. and we want to do that with a small and simple operation. >> the timing of the ipo, why go public now? >> why not? is a great market. we are happy we had our company
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ready to go public. of goingmportance public is that it gives us access to cheaper capital, both in the debt and equity markets. and we can use that to buy and expand our planes at a lower cost. >> how does richard branson affect to a brand? obviously, the guys absolute rock star, really, the picture of success. on the other hand, you have some tragic merging galactic -- the tragic virgin galactic crash two weeks ago. >> richard's on north star when it comes to service, when it comes to our product, and when it comes to our people. that is what he is focused on. the galactic thing was obviously tragic, but they are trying to do something very difficult, something visionary. and those things happen when you push the boundaries. he is a great guy to have around. >> when i think virgin, the three major brands are you, obviously, virgin galactic, and virgin atlantic. do you try to tie those through
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together? >> we don't do much with galactic. they are still in their early stages. we do things with atlantic, figure player, and virgin australia as well. >> virgin australia as well. what you do to attract more corporate customers? brinesnking of all those -- brands together for the bike is the business is key. >> 40% are business travelers. we have agreements with 37% of the top 100 corporations in the u.s. we are good at penetrating the business market, and we do it by having a great product at a lower price. wi-fi, we fleetwide were the first to do that. that really attracts the business traveler. >> finally, i want to ask you about how airlines deal with their two major cost, which is obviously the people you employ, how do you deal with that cost? and then the price of oil, which is obviously right now not too high.
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costs,ar as our people we pay average raises -- average wages. we have competitive wages. the key is that with our model, we have significant productivity advantage, about 30%, because we have a simple operating model. the labor costs take care of themselves when you have high productivity. as far as fuel goes, you follow where the fuel markets are. when times are good right now, you take it to the bottom line. the good thing i will say about the industry is that we build this industry based on $100 crude. now that we are at $75 crude, it will be a significant increase in profitability. >> david, thanks very much. we wish you good luck. david cush, the ceo of virgin america on the first of crate -- of trading. bonner men ofid cpg capital coming to you from washington, d.c.. ♪
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>> we just hit 26 past the hour, so bloomberg is on the markets. take a look at the indexes and you will see not a lot today. the s&p 500 barely moving there. almost a0th of 1%, full point. 0.4% -- 0.24%, almost a full point. the dow jones is holding here at a peak, it looks. 0.1% at 4686.up mcdonald's is driving for the ninth day -- nine times in a
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row. it is on a streak since 2006. and by the way, janet partners we just learned today increased partners, wejenny just learned today, increase its stake. stay with us. we are back in two. ♪
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fax -- >> welcome back to -- let's try it. >> welcome back. i'm erik schatzker and this is stephanie ruhle. >> you know, i forgot my name. i am stephanie ruhle. many grossman is here, the ces who oversees three point $5 billion in direct to consumer sales for home shopping network.
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next we get to see a broad swath of consumer behavior, everything from middle income of two our front gate brands, which is luxury. and i would say no matter what category of business you are in, there is a lot of opposition for share of wallet, or we say share pocketbook. there are headwinds and .ailwinds headwinds, what are people spending their money on? there is the cost of technology. spendple are going to less than their discretionary income, we have to focus on why they will spend it with them. that is our maniacal focus. we have to use everything we have in terms of the data in terms of our 60 million customer database, use that to create meaning. we have systems to be able to do that, to be able the personalized and customize most of that is why our customer base
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is at an all-time high. and deadly double down a digital, particularly mobile. 17% of our total company sales, not just digital sales, are mobile. about old-school hsm, it's my mom sitting on a couch watching hours and hours of it. >> we have turned that holding on its head. our mobile customers are young and affluent and diverse. 17% of our customers are also an early digital adapter. why? she wants to shop. she wants it to be ubiquitous, across every channel post (s) to share. she's very social. and she loves, for example, to --y casual games will stop casual games. most importantly, how are you giving her unique products and experiences that you cannot get anywhere else that we will not
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play the match the price game at retail. 75% of all the products we sell are exclusive to us. makeot only do we try to the product compelling, but the experience around the product. for example, tomorrow, keith urban, his guitar and learn to play in a format where you play music. last friday, we launched tyra banks beauty. we had a gospel choir. we had a runway and a dj. entertainment company now then. >> we have to be. we are cross -- >> you are an entertainment company now then. >> we have to be. we are cross media. the two most overused words in retail are "lifestyle" and "experience." if youdy uses them, but define them. we do find them. you have to crate an experience where someone will come to you every single day, not because you are trying to sell them something. mobile is key to that. , 10ave the spin to win
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times a day. you check your weather to my your e-mail, and then you come to us. click's if "lifestyle" is one of the two most overused words, how do you decide who will be the next lifestyle? everybody wants to be this lifestyle brand. how do you figure out who the right people to partner with art deco -- with our? i work for cannot for nike. these are the brands -- i work for ralph lauren, for nike. these are the brands that are able to stay relevant. why? because they are focused on the customer. they are very clear on who they want, but very clear on who they may not. and ralph used to say to me, maybe it is more important to know what you say no to than what you say yes to.
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are going to really have an authentic proposition for your consumer, you need to know who you are. you need to know in our case at forwhat brands are right our customers. we say no more than we say yes, because of a finite amount of assets that we can allocate. and we have to allocate them to the right things that we think will respond to. >> you mention a couple of moments ago the price of gas being a factor in what consumers spend. it clearly is, obviously, discretionary income becomes discretionary when you don't have to spend it on getting to work. how do you see the consumer response with the cheaper gas prices? and how do you make sure he does not get spent somewhere else? >> two things. hsn side, we have the consumer example.
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we were going through the recession of 2008, 2009, we saw a self purchased versus a selfish purpose -- selfish purchase. sales of jewelry, apparel, accessories, those were tougher. it she was still going to buy things that would save her time and money for some she was cooking more at home. we have to be very agile, because we do have this information. we started doing more in cooking and household. and beauty is the great almost common denominator. she would still treat herself a stop -- treat herself. still we make sure she shops with us? exclusiveating an experience, and a destination where this is discovery and enjoyment. >> the money, the purse, the walla, the pocketbook, what are people spending extra money on? has grown seven point 5%.
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we have definitely had accelerated growth, and almost in every category. including in electronics, which was not a big category for a while. but when we are really seeing momentum is beauty and health. we are tough policing in the kitchen and culinary category, anything in the home said that could be diy, home improvement stop -- in home improvement. contrary to a lot of what is happening out there, our fashion business is very strong, but it is very differentiated. on --iman, or exclusive diviners -- designers. exclusive collection to us. we curate to the customer. we are not just trying to see this amorphous range of products she has to sift through. we are doing that work him and i think the idea of cure ration
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and saving her time, but serving up what is relevant to her is really important. >> you mentioned tyra banks friday night, and you had a , a dj, runway, a circuit. that cost you a lot of money. she is tyra banks. aren't her fans going to go to her matter what whether or not ou spend on that extravaganza? >> her fans have its petition she will be doing something different. when i met with her for the first time, she had a vision, and i said i would partner with her on that vision. whether it's in the digital world or the television world, you have to create a bit of disruption. >> there's not a lot of disruption on this show. we should have told you. do you think storytelling sells? >> i think fundamentally, that's what people respond to. yes, they want the products, but if you want -- if you can have
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the story behind the product, that is empowering. likemeone says to me, i your necklace, i can just say thank you. i can say, this is created in it is.whatever >> is that the biggest problem that jcpenney has? i know it was not somewhere you wanted to go, but when i think about jcpenney, i don't know their story. >> i would not single out jcpenney. i would say anyone who is going to be successful today has to have a differentiated proposition. you should be able to be very clear. when the customer here's your name, they should be able to say what you stand for. -- when the customer here's your name, youars your should be able to say what you stand for. ask mindy grossman, thank you very much. -- >> mindy grossman, thank you very much. ♪
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collects the company that owns the satirical news site onion is exploring possible sale. in 1988 and is now completely digital, no paper version, and has branched out into several the website and youtube channels. why sell now? alex joined me to discuss this. what is your favorite onion headline? >> i am so starving versus i'm so starving. do you know that one, that counterpoint? >> unlike the one that says i
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can speak spanish. but also, david wallace is -- david foster wallace's." letter. correct you are a big fan of him. >> i am. but they are putting themselves on the block. why now? >> some of the legacy media company are really -- companies are really looking at digital media sites as places where young people go and where potentially ad dollars are beginning to flow. we are seeing a small -- a slow migration away from media and toward sites like the onion for of the draws younger viewers and has even moved into different ventures recently. club.wn a new av they've tried a different -- a couple of different onion news network. that has succeeded or not succeeded, depending on which one you are talking about. they are trying different things and moving in new directions to try to get new viewers and more eyeballs.
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ago, it was ays $100 million to $300 million valuation. has 600 million volumes -- followers on twitter. >> but it doesn't focus on video as much. and video ad rates are a little higher. >> they have tried. they try to newscast, but it doesn't come across as funny. business'sd the legacy newspaper. it will be difficult to move out of print stories because that is where their base is, really. now it is just a digital newspaper, really. >> on funny or die the other day, the actually said, we don't want to sell ourselves. we're just putting it out there. >> correct. thing with same onion, or they are really legitimately looking for a buyer?
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>> i would not be surprised if there are more comedy digital media sites that are looking at this if they have not already and maybe they are thinking, this is the time to sell, because valuations are high. i think that is what it is more. >> funny or die, i believe it's owned by will ferrell, at a mckay, and some of his buddies for the >> and some to make 15% owned by time warner. i see. but the onion is owned by a fund manager for the yes. >> since 2003? wrecks exactly, and he's held onto this. it's just a guy. and he doesn't have any venture capital money, so he probably has to decide whether he still wants to be ceo of this company or does he want to move on and possibly have some kind of leadership position if he does so? he declined to comment for our story. >> that's not very funny, at
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all. >> no, it isn't. but it's also not a denial. it is not saying "we are not for sale pico -- "we are not for sale." >> what else do you see? >> college humor, that could theoretically be one to look for. and then we see a lot of other -- the question, i think, would be at the next stage, who would buy it? disney just ordered a digital media venture with peter chernin. they bought full screen. maybe they would be a potential home for 70. or do we see some of the media ?hemselves maybe they will do their feet in. antitrust.t with the >> lord knows, s&l could use a better digital home. could use a better digital home.
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>> they have looked at this in the past, and maybe they would be interested in doing something like this. >> alex, thank you for the excuse to read the onion today and call it work. , live up, david bonderman from washington, d.c. ♪
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>> i'm matt miller. i am manning the ship. new york while erik schatzker and stephanie ruhle are out in washington, d.c. at the conference. david bonderman of tpg capital. he will speak with the economy. the controls about $66 billion and hardly ever talks. we are excited to talk with tpg at therman of conference in washington, d.c. stay tuned for that. it is coming up right here on bloomberg television.
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>> let's go live to the
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conference in washington, d.c., where jason kelly, bloomberg links boss down there is interviewing the cofounder of and timid bonderman cole. let's listen in. >> we just spent the last week alone, which we would have spent the rest of our time listening to them, from hong kong to cause extent, presumably with your investors in some of -- in some cases. david, what is foremost on their minds in terms of their concerns looking ahead? american so, we are we get a slanted point of view. it's not slanted against america, but because they think we know what's happening over here. say noryone -- i would one really knows what is going on in washington. on most people's mind, the pricing of petroleum and what's
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ofpening with the results the shale discoveries in the u.s., and the falling oil prices . everyone understands -- and it is on the forefront of people's minds in the middle east, which is a hydrocarbon oriented part of the world. but they are very concerned because everyone understands if the russians go broke if oil stays below $95 per barrel, and they are all thinking it is going to $70. crystal they had a good ball come a they would not be talking to us, but nevertheless. there is a lot of worry about russia, ukraine, how that impacts the middle east, and what the u.s. does about energy policy and about russia. >> what are you hearing? our investors have seen a quite good run in their portfolio and they are very exposed to develop markets, and
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i think the alpo? interest rates are going up and earnings are slowing, and if you add that all up, where do you invest? it's giving people concern. click feel a thing i want to talk about -- >> the other thing i want to talk about is the u.s. government, and the stalemate. and by the way, is jeb bush when he for president, and if so, who wins between the two oligarchical families? >> what is your answer to that? [laughter] staying with the topic of investors for a second, jim, i've heard you say things before about this changing mix. and sovereign wealth funds will have a piece of -- a bigger piece of the overall pie, a piece that public pensions have had a big place. and the new mix in retail investors -- and then you mix in retail investors.
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implications for how you invest or where you invest or how you run the firm? think we are seeing an extraordinary change in our customer base. two years ago, there was a question of whether private equity was real and whether he would last through cycles. we came through the crisis pretty darn well and as a result, academics and others decided we were pretty well deploying capital. it is also $2 trillion industry. if you like without it in a garage, but it's a $2 trillion industry. and the fact that sovereign wealth funds were not playing as well two years ago, and the next big uncharted area is individual investors. who have little or no way to participate in private equity. it is uncharted now, but people seem to be charting it, or trying to. how soon will that happen? and is it the right move?
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be surprised if five or seven years from now there is not a lot of individual money in alternatives. think back 15 or 20 years ago and it was hard for individuals to invest in the real estate market, or the energy market. today, look at the size of the mlp pocket -- market. somehow, we created structures that allow that to happen for some of the guy will have a crystal ball as to what that will be, but it would be surprising if regulators did not allow individual investors to go into an area where professional investors and derivative relies have been -- has been an out performer. and we're already at $2 trillion in individual products will stop a bit of a surprise. >> forgetting what the actual , adding inght be circumstances with u.s. pension funds, or a little bit different circumstance with sovereign wealth funds. by a large, sovereign wealth
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funds are the nations store of wealth, and they will accumulate in terms of the capital. it's different here, because pension funds typically have an yearation of 5% to 7% a where they have to pay out to the beneficiaries, whether it is the police or the firemen, or whoever that pension fund happens to be for. is a little time for fixed income, for debt. people are getting 0% real returns. they cannot live with that. as one single pension plan said to me, if we put more money into private act with it -- private equity assets, i may not be able to make my 6% payout for some but if i don't do it, i know i will not be up to make my payout. there is a shift from these kinds of investments being out of favor to being very much in favor. jim talked to you about different products might be part of this universe am a but the universe is expanding. -- of this

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